Butner Inc. requires all capital investments to generate an internal rate of return of 14%. The company is considering an investment costing $100,000 that is expected to generate equal, annual cash inflows for ten years. The annual cash inflows are expected to be:

Question

Quizplus · Accepted Answer

The correct choice is A) $19,171. This is calculated using the formula for the annuity payment given the present value (the initial investment of $100,000), the number of periods (10 years), and the required rate of return (14%). The calculation confirms that an annual cash inflow of $19,171 will provide an internal rate of return of 14% over the 10-year period.